Question

Product Cost Concept of Product Pricing Willis Products Inc. uses the product cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 5,000 units of medical tablets are as follows: Variable costs per unit: Fixed costs: Direct materials $94 Factory overhead $160,000 Selling and admin. exp. Direct labor 34 55,000 Factory overhead 29 Selling and admin. exp. $180 Total Willis Products desires a profit equal to a 20% rate of return on invested assets of $382,500.

Answer 1

Answer is given below with working

Total Manufacturing cost Variable Cost $900,000 Fixed Cost $215,000 Total cost $1,115,000 Cost per unit of production and sale of 5,000 units $223.00 Product Cost Mark up 6.9% Invested assets Rate of Return Return Return per unit Cost per unit Mark up on Cost $382,500 20% $76,500 $15.30 $223.00 6.9% Selling price per unit Cost per unit Mark up Selling price per unit $238